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Denver homebuilders report high demand for skilled workers

Site manager Mark Tedplitsky walks through a luxury apartment complex under construction by Drahota Construction near Interstate 25 and Dry Creek Road. Building activity in the metro area is moving from commercial toward multifamily residential. (AAron Ontiveroz, The Denver Post)

The demand for new homes in Colorado has left builders scrambling to find enough skilled workers, a scenario that seemed improbable a year or two ago.

For buyers, that could mean longer wait times for new homes and higher prices to cover the wage increases that skilled workers are now commanding.

After rising 51 percent last year, residential construction permits in Denver are up another 46 percent so far this year, said Jeff Whiton, CEO of the Home Builders Association of Metropolitan Denver.

"The rebound in residential construction is very robust," he said.

So robust, it has outstripped the local industry's ability to find enough crews to keep up with demand, even though construction employment remains significantly below the peak.

"Framing is a real challenge, and so is drywall," said Cheryl Schuette, owner of JWilliams Staffing Colorado, a real estate recruiting firm based in Denver.

Specialty-trade workers along the entire construction chain, including concrete, electrical and plumbing, are increasingly in short supply.

When the Denver HBA held job fairs in the fall and spring, workers on the professional side — schedulers, superintendents and salespeople — came out, Schuette said. But few specialty-trade contractors attended.

"Almost no one showed up," she said. "It is something we are going to have to work through."

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After topping 118,000 in the summer of 2007, the number of payroll jobs in the construction specialty trades in Colorado fell sharply for nearly four years, bottoming out at just above 68,000 in the winter of 2011, according to the U.S. Bureau of Labor Statistics.

By April, payroll counts were back to 78,000, still a long way from the peak. On the surface, that would seem to indicate that plenty of displaced workers remain for the industry to absorb.

"There were a lot of people who retired out of the trades, and there were no young folks coming in to replace them," Schuette said.

That dearth of training could take a long time to overcome, given that some apprenticeships to master a craft can take years.

The oil-drilling boom in states such as North Dakota lured away some construction workers, while others switched to less physically taxing careers when work dried up. Stricter immigration laws have also reduced the ability of skilled construction workers from Mexico and elsewhere to fill the gap.

Builders, already struggling with a shortage of developed lots to build on and rising material prices, must now increasingly compete for a limited pool of craftspeople.

Brookfield Homes maintained close ties with its contractors during the soft years, but they need to pass on price increases to attract workers — including a recent 15 percent increase for framing.

"We pay two times a month, whereas the normal rate in the industry is only once a month. We do that to make us a priority, so the contractors can keep their subs and vendors current," said Jim Sanford, a manager of construction with Brookfield Homes in Denver.

Builders also report that some smaller contractors, burned so badly in the downturn, remained worried about overstaffing. Others want to keep their staffing below the levels that would require them to provide health insurance under the Affordable Care Act.

Contractors nationally have reported other firms poaching their crews, and that appears to be happening locally.

"Our company is losing crews," said Christina Presley, division president in Colorado for Meritage Homes.

One Meritage subcontractor lost its framing crew mid-job after another firm made a higher offer.

"We are understaffed and having a hard time hiring people," Presley said.

Meritage has advertised for field managers in Denver since December. As soon as it hires one, it needs more because of demand.

Meritage and other builders said they aren't turning away sales, but they are telling buyers upfront to expect a longer wait.

"(Labor shortages) will extend the length of time it takes to build a house," Presley said.

Whiton said it is taking five to eight months for new homes to be completed, depending on complexity. The longer the time between a sale and completion, the more vulnerable builders are to having to absorb cost increases.

One potential source of relief could come from the commercial-construction side, which has seen a slowdown in contracts this year, according to data from McGraw Hill Construction.

Through April, the value of contracts for future commercial projects was down 40 percent to $648.7 million in metro Denver and 24 percent to $1.08 billion in Colorado compared with the first four months of 2012.

By contrast, residential contracts, which include apartments, were up by 51 percent in metro Denver to $873 million. Statewide, they were up 56 percent to $2.14 billion in the year's first four months.

Workers shifted from residential to commercial when homebuilding fell off a cliff, and the flow could reverse as home construction gathers steam.

Michael Gifford, president of the Associated General Contractors of Colorado, said there doesn't appear to be any noticeable flow of workers from commercial to single-family. And a few large commercial contracts could reverse the trend reported in the McGraw Hill numbers.

But commercial contractors are reporting more activity building apartments, which falls under residential.

"We are hearing of employee recruiting amongst commercial firms or crews, as well as movement from commercial to multifamily residential," Gifford said.

Terry Drahota, owner of Fort Collins general contractor Drahota, said apartments now account for three-quarters of his work, up from half. Within a year, he expects they will represent 90 percent.

"We are fortunate to be building apartments," he said. "That is the only thing going for us."

The firm has expertise in wood framing, giving it an advantage over commercial contractors specializing in steel. It is working with large national subcontractors to better meet the tight deadlines it faces.

Even then, Drahota has needed to fill the gap, especially in framing.

"We have to figure out how to supplement their forces," he said. "We have to bring in our own help."

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